Being a full-service solar company means, in part, that from time-to-time we are asked to step in and fix a system that is no longer operational and the original installation company is long gone. Or the installer is still around, but the client was so annoyed by the sales/installation process that they don’t want to have anything to do with the company anymore. We even get calls from clients who are pretty sure that their system is working, but the way the install went - excessive delays, mismatched parts, or just an overall sloppy look - has left them with an uneasy feeling, and they want a second set of eyes to come out and give them peace of mind. All in a day’s work and we are happy to help.
But lately we have come across a different situation: the system is fine, but the financing is burdensome. Now we aren’t talking about leases or PPA’s here - we’ve outlined at length our views on those. No, these are credit-worthy folks who are feeling trapped by their high-interest solar PACE loan. PACE, as you may recall, stands for Property Assessed Clean Energy, and it allows homeowners with less than stellar credit to qualify for a loan to improve the energy efficiency of their home, including by adding solar. PACE financing is not tied to the homeowner’s personal credit, and the debt “runs with the land” as part of the property tax assessment (hence the name).
Lots of solar installation companies love PACE because it is easy for them to find out in advance whether the prospective client is likely to qualify - and if they have equity in the home and are up to date on their mortgage and property tax payments they almost certainly will, and for far more than the cost of a solar system. The paperwork is handled electronically, funding decisions are fast, and there are no “dealer fees” - points, really, that often are charged back to the client.
So what’s not to love?
In a word, the interest rate. At a time when Home Equity Lines of Credit (HELOCs) are readily available and at interest rates often below 4%, PACE loans can be double that or more depending on the term! That means on a 10-year loan to finance a $20,000 solar system, the PACE borrower could pay as much as $6,500 more over the life of the loan. Ouch!
Let’s be perfectly clear: PACE is a great program for people looking to lower their energy bills but who don’t have great credit. Their annual savings from installing solar or other PACE-funded improvements will regularly exceed the cost of the loan, providing real value to them. But if you are a homeowner with great credit, you shouldn’t let yourself get stuck with an unduly expensive loan, just because some solar sales guy thought PACE would make his life easier!
If that is the situation you are in, shop around. See if you can qualify for a HELOC to pay off your PACE loan - you might learn that a simple switch will greatly increase your solar savings!
We have been waiting quite a while, but the good news is that HERO Financing for residential solar has finally arrived in Los Angeles County!
On Friday, May 23, the HERO Financing program formally launched in LA County after being a huge success in Riverside and San Bernardino counties, helping fuel explosive growth of solar installations in those counties.
Here is how they describe the program:
The HERO Financing Program provides homeowners a unique opportunity to make home energy
improvements through property tax financing. Benefits include 5-20 year terms, tax-deductible interest,
transferability when the property is sold and consumer protections.
To learn more go to heroprogram.com
Unfortunately, not every city in LA County is (presently) participating—most notable laggard from our perspective? Pasadena! Come on, Pasadena, what is up with this? Pasadena was signed on to the PACE program years ago, so what is holding you back now? (Oh, and the City of LA is not signed on yet either, but no shock there.)
Here is the list of participating cities in LA County as of the program rollout:
|Alhambra||Hawthorne||Rancho Palos Verdes|
|Azusa||Hermosa Beach||Rolling Hills|
|Baldwin Park||Inglewood||Rolling Hills Estates|
|Carson||La Cañada Flintridge||San Dimas|
|City of Industry||La Verne||San Gabriel|
|Diamond Bar||Monrovia||South El Monte|
|El Monte||Montebello||South Pasadena|
|El Segundo||Monterey Park||Temple City|
If you would like to encourage Pasadena to get with the program, here is some contact information for you:
Bill Bogaard, Mayor (626) 744-4311
Margaret McAustin, Vice Mayor (626) 744-4742
Jacque Robinson, Council Member - District 1 (626) 744-4444
John J. Kennedy, Council Member - District 3 (626) 744-4738
Gene Masuda, Council Member - District 4 (626) 744-4740
Victor M. Gordo, Council Member - District 5 (626) 744-4741
Steven Madison, Council Member - District 6 (626) 744-4739
Terry Tornek, Council Member - District 7 (626) 441-4802
We are looking forward to participating in the HERO program. We hope it will help more homeowners finance solar power projects with little or no upfront costs, and in a way that is far more financially beneficial to them then other financing mechanisms, like solar leasing.
You might think that the hardest part of a small commercial solar project (15-50 kW) is the actual installation - after all, installing solar does combine the two greatest occupational hazards to health: falls and electrocution. But you’d be wrong. You can guard against those.
No, the hardest part - after all the time and expense of finding your potential client and putting together a winning bid - is helping them figure out how to pay for it.
Small commercial projects are an odd-sized nut to crack when it comes to financing: at a cost of between one and two hundred thousand dollars they tend to be too pricey for an entity to just write a check, but they are too small to support more elaborate financing schemes which usually only apply for projects in excess of $250,000. So what to do?
We have written a lot about PACE, and while we are excited about it as a concept, it doesn’t seem to be getting a lot of traction.
For one thing, many non-profits (a niche of ours) don’t qualify since they don’t pay property taxes. For another, a big part of Southern California has failed to get on the PACE bandwagon at all. In particular, while Los Angeles County has a program in place, not every city has signed on (we’re talking about you, Irwindale!) and Orange County is a PACE black hole, with no activity there at all. What is up with that? (And please, don’t tell me this is a political thing - there is nothing more inherently conservative than putting your money into a near-zero-risk investment wth great returns.)
Similarly we find it odd that local banks aren’t reaching out to solar companies to work with them on financing these projects with conventional, low-interest loans. After all, installing solar helps to reduce a company’s operating costs in an area of greatest volatility. (You did hear that SCE is raising its rates on average by 17.2% over the next three years, right?) So financing such an improvement means that the local bank is creating a more stable company in their community - which means that they will be more likely to stay in business and remain a customer for longer - which is good for everyone, right?
And what of the national banks? Why aren’t they reaching out to local companies and not just the giant players? A year ago we participated in a small business contest sponsored by Chase bank. We easily collected the required number of online supporters to qualify (thank you!) and while we didn’t really expect to win, we certainly expected to hear from Chase about how they could work with us going forward. Well we were half right - we didn’t win. But as for follow-up from Chase? Zilch, zero, nada.
A Twitter friend reminded us of Mosaic, the crowd-funding service for financing solar projects so we went to their website to check them out. This is a curious thing. For one thing, the website disclaims their service from being crowd funding, saying:
Mosaic’s services do not constitute “crowd funding” as described in Title III of the Jumpstart Our Business Startups Act ("JOBS Act").
We aren’t sure what that means, but it is, at best, counter intuitive.
For another, we couldn’t find anyway on the website to submit information about a potential project that you wanted to get funded. The best that we could do was find a “support” email address which produced an auto-response but as of now, nothing else.
What is needed for small commercial projects is a simple and elegant tool like the one displayed at the start of this post. Minimal paperwork. Reasonable cost of capital given the exceptionally low risk. Quick approval times. Surely someone can help us crack this nut?
Year-end is often a time for retrospection, and few things are more popular this time of year then Top 10 Lists (unless it is kissing under the Mistletoe - to which we say, feel free to combine both!). We decided to look back over our dozens of posts this year and highlight the 10 most popular based on our viewership data.
Each of these posts was viewed more than fifteen hundred times - which leaves us both humbled and very thankful indeed.
So here they are, our Top 10 Posts for 2012 (click on a title to read the post in full)…
One of the big stories of the year has been the on-again, off-again, on-again story of SolarCity’s proposed Initial Public Offering. While cleantech IPOs have not been a very pretty site, there was much buzz about the SolarCity IPO as being a potential bellwether for a change in “green” fortunes. SolarCity’s original confidential filing with the SEC coincided with a remarkable repricing of their systems as recorded in the CSI data:
By the time the IPO was publicly revealed in October, it was clear that one of the major risk factors facing potential investors was how the U.S. Treasury would treat the question of how SolarCity had valued its systems for purpose of claiming federal tax dollars. A question, which we would note, still remains to be fully answered but the preliminary indications are not good for SolarCity and its existing investors. For example, SolarCity revealed that for a limited number of systems, Treasury had reduced the allowable price per Watt from $6.87 to $6.00 for California systems and from $6.20 to $5.00 for Arizona - reductions of 12.6% and 19.3% respectively. When applied to the $341 million SolarCity says it has claimed so far, that could be a $43 million haircut.
As of this writing, SolarCity is now saying it will go forward with a revised offering at $8/share - down nearly 43% from the midpoint of its earlier proposed range of $13-15. Stay tuned, this story is far from over.
In an election year it was not surprising that some echoes of that contest found their way into the posts for this blog. One interesting point was the survey data about the popularity of solar among voters. Didn’t really matter what your party affiliation, solar beat out all other forms of energy - heck, solar was more popular than chocolate!
Not that you could guess that based on some of the press coverage of the industry which seemed to have only ever heard of one solar company - Solyndra!
But voters’ belief in solar included putting taxpayer money behind it. A full 64% of all voters - and an even more impressive 67% of the much courted “swing voters” - supported tax subsidies and other financial incentives for solar. (By contrast, only 8% of all voters supported continuing subsidies for the coal industry.)
One of the most written about topics on this blog has been the struggle to bring PACE financing to reality. PACE - an acronym for Property Assessed Clean Energy - is a program that allows a property owner to finance a solar project by annual property tax payments. PACE was all set to go in the residential market when Fanny and Freddy balked in the aftermath of the 2008 mortgage bubble crash.
But there is good news as the program has been revived for commercial property owners in LA County (and some surrounding counties as well). The county launched a website and interested potential clients can learn more about the program there. We are looking forward to doing our first PACE project in 2013.
Most residential and commercial solar systems make use of net metering - that is, the method by which a solar customer gets credit for excess energy produced by their system during peak output versus the amount of energy actually purchased off the grid. Those numbers are “netted out” and the customer pays if they are a net consumer and is given a payment (tiny though it may be) if they are a net producer. Good deal all around, yes?
Well, not so much, apparently, if you are a utility. Utilities in the state, particularly PG&E, have been trying to severely limit the number of solar power systems subject to net metering. But in an important victory for the solar industry, last June the California Public Utilities Commission ruled that PG&E’s proposed way of measuring that cap was incorrect and in so doing, substantially increased the number of systems that California residents and businesses will be able to install.
The utilities did get something in return, however, a study to be performed this coming year to assess the costs and benefits of “various levels of [net metering] implementation." This will be a very important study and it may well have far reaching impacts on the growth of solar in California. Needless to say, the solar industry will need to be heavily involved in monitoring this process as it is certain that the utilities and their lobbyists will be pushing hard to get a result in their favor.
One of the frustrations of running a solar company is that there are potential clients out there for whom their own solar power system simply cannot work. Their roof might be all wrong, or the shading from surrounding trees simply cannot be overcome. Or they might be renters, or a commercial business with a relatively small, weak, roof that doesn’t match their load. Whatever the case, but way more often than we like, we simply have to say no.
Community Solar - the goal of SB 843 - could go a long way toward solving that problem. Under a Community Solar program, a system developer could sell shares in the output of the system to any customer of the utility where the project is located. Those customers could purchase just the amount that they needed, unconstrained by the happenstance of roofs, or landlords, or loads. The system provides its power directly to the grid, and the utility bills the customers based on their share of the energy produced (much like the “green energy” that some utilities now allow their customers to purchase).
Up against the end of the legislative session and facing still opposition from the utilities and their allies in the legislature, SB 843 died in September.
The good news is that the bill is slated to be reintroduced next year.
We’d be lying if we didn’t admit that our favorite project this year - at least in terms of coverage on this blog - was our install at the Westridge School for Girls here in Pasadena. Seven different articles chronicled that project from our initial selection, to a series of step-by-step construction stories, to reporting on the accolades that the project garnered for both Westridge and Run on Sun.
Micro-inverter manufacturer Enphase Energy featured the project as one of their Projects of the Week, the City of Pasadena cited the project in selecting Westridge for a Green City award, and Pasadena Weekly put the project on the cover of their annual “Green Issue." Some great PR for a great project with a great client. We look forward to doing it again with the folks at Westridge real soon.
LADWP continues its slow march to rolling out a FiT and our #4 post detailed the latest status update from DWP. Alas, we still haven’t seen data from the demonstration project released and as near as we can tell, the “standard” contracts for those approved projects are still being finalized long past the October-November timeline that was announced with this update.
Will this program roll-out in January as scheduled? Seems unlikely, but stay tuned!
Voters in California put their votes where the polls said they would be - supporting Proposition 39 that would greatly increase funding for energy efficiency and green energy projects with 60% of the vote.
Amidst rumors of possible legal challenges, the fight over, and potential implementation of, Prop 39 will be one of the big solar stories in 2013.
Mega-home builder Centex of the Pulte Group has a problem with some of its highly-touted “solar homes” - the homeowners cannot use their solar power systems because of faulty roofing tiles that threaten to catch on fire. The manufacturer has gone out of business and while Centex has said that they will pay for repairs, they are asking homeowners to sign a pernicious release that could leave them exposed if there are problems with the repair down the road.
After we originally wrote about the problem, we were contacted by one of the homeowners asking for our help. We got Centex to admit that they might conceivably waive the release requirement but apparently only if the homeowner is willing/able to push back - hard. Frankly, we think that Centex should just step up and do the right thing - but if they are unwilling to do so, we sure would like to see the authorities provide whatever extra encouragement is needed.
Despite only being published a short time, this story jumped to be our second most popular post of the year and it would make our year to be able to report that this ultimately has a happy ending. We’re still waiting.
Once again, our most popular post for the year was our annual examination of the Outliers and Oddities as determined by analyzing the CSI data for the first half of the year. Since it was published on September 6th, it has racked up more than 4,000 views!
Of all that we reported on in this very lengthy (2795 words - yikes!) post, perhaps the most troubling was what we documented with this graph:
This graph shows how the extraordinary delays in installing systems by industry-giant SolarCity is retarding the progress of the industry in meeting consumer needs and in protecting the environment. Word to the wise, bigger isn’t necessarily better and “free” may not be all that it is cracked up to be!
That’s our recap on the year - our best year ever. We are really excited for 2013 as the economy continues to improve and we finally have the uncertainty of the past twelve months behind us, we are expecting great things from the year ahead. And, of course, you can continue to expect our mostly informed, somewhat irreverent take on all things solar. Thanks for your support and encouragement - especially you, Vick!
It has been nearly a year since we last wrote about PACE, or Property Assessed Clean Energy, a means by which an assessment against a parcel’s property tax is used to pay for Clean Energy improvements, including solar. At that time, PACE for residential properties had been dealt a mortal blow by Fannie Mae and Freddie Mac which refused to subordinate their loans to the PACE assessment. (Never mind that by lowering a property owner’s utility bills you made it far less likely that the owner would default on their loan. Wonder who benefited the most from Fannie and Freddie’s actions? Certainly not consumers.)
Residential customers are still out in the cold, but for non-residential property owners the situation, at least in LA County, is far more promising and this may be just what is needed to get commercial and non-profit building owners into the game. The basic idea is this: any property owner who pays a property tax bill - including non-profits like private schools - can participate. They hook up with a funder - Wells Fargo is actively participating, for example - and the County issues a bond to that funder in exchange for the proceeds to fund the project. The property owner then pays off the bond by a property tax assessment that “runs with the land” so it is not a personal obligation of the property owner.
Part of the beauty of this program is its flexibility. The funder and the property owner reach mutually agreeable terms for the project including interest rate and payback period. (Indeed, we see this as a great way for a SunCorp to assist a non-profit entity in going solar.) The County simply determines that the proposed project qualifies for the program and then acts as the bill collector.
There are requirements for participation, but they are not particularly onerous:
Notably, there are no program requirements regarding equity in the building (although the funder may impose some) or other financial hurdles. The program can finance up to 100% of the project cost, including engineering reports and permit fees. To qualify, the building must either be in the unincorporated areas of the County or in one of the 79 cities (some 90% of the County) that have approved the program.
The County is actively trying to get the word out to building owners throughout the region. They have launched a website, and will be offering an outreach meeting for interested contractors sometime in August (we will post the details when we have them). In the meantime, you can request more information by emailing them at: firstname.lastname@example.org.
«climate change» cpuc enphase «enphase energy» «feed-in tariff» fit gwp «jim jenal» ladwp «net metering» pg&e pwp «run on sun» sce seia «solar power» «solar rebates» solarcity usc «westridge school for girls»